Interim report 2018
Stenprop Limited
Incorporated in Guernsey
Registration number: 64865
LSE share code: STP
JSE share code: STP
ISIN: GG00BFWMR296
('Stenprop' or the 'Company' and together with its subsidiaries the 'Group')
Interim Report 2018
Stenprop Limited^ presents its half yearly report for the six months ended
30 September 2018.
Stenprop is a listed property investment company with a diversified portfolio
of commercial property currently located in the United Kingdom, Germany and
Switzerland. The Company is a UK REIT and is listed on the Specialist Fund
Segment ('SFS') of the Main Market of the London Stock Exchange ('LSE') and
on the Main Board of the Johannesburg Stock Exchange ('JSE').
Highlights
GBP1.37
Diluted IFRS NAV
per share
4.63 pence
Diluted IFRS earnings
per share
2.75 pence
Property-related diluted
IFRS earnings per share
(excl. management fee
income of 1.88 pence)
47.3%
Loan-to-value at
30 September 2018
GBP1.42
Diluted EPRA NAV
per share2
5.28 pence
Diluted adjusted
EPRA earnings
per share1
3.40 pence
Property-related diluted
adjusted EPRA earnings
per share (excl.
management fee income
of 1.88 pence)
3.375 pence
Interim dividend per
share declared
Six months Six months
ended ended
30 September 30 September
2018 2017
Statement of Comprehensive
Income
Net rental income GBP16.0m GBP16.0m
Net operating income GBP16.1m GBP16.5m
Dividend per share 3.375p 4.00p
Diluted IFRS earnings
per share 4.63p 3.08p
Diluted adjusted EPRA
earnings per share1 5.28p 4.87p
As at As at
30 September 31 March
2018 2018
Statement of Financial
Position
Portfolio valuation (incl. JV) GBP653.8m GBP733.6m
MLI assets within portfolio 27.0% 20.1%
Diluted IFRS NAV per share GBP1.37 GBP1.36
Diluted EPRA NAV per share2 GBP1.42 GBP1.41
Loan-to-value 47.3% 49.2%
1. See note 5 for reconciliation to IFRS earnings per share (and for all
future references in this report to IFRS/EPRA earnings).
2. See note 6 for reconciliation to IFRS NAV per share (and for all
future references in this report to IFRS/EPRA NAV).
FX rates in period
Average foreign exchange rates in the period: GBP1.00:EUR1.131;
GBP1.00:CHF1.31 (2017: GBP1.00:EUR1.138; GBP1.00:CHF1.259)
Period end foreign exchange rates: GBP1.00:EUR1.123; GBP1.00:CHF1.276
(31 March 2018: GBP1.00:EUR1.137; GBP1.00:CHF1.337)
* 'EPRA' means European Public Real Estate Association. 'EPS'
means earnings per share. 'NAV' means net asset value.
Operational Highlights
- Stenprop converted to a UK REIT on 1 May 2018 and listed on the
London Stock Exchange ('LSE') on 15 June 2018.
- Stenprop made acquisitions of six multi-let industrial ('MLI')
estates in the six-month period with a combined purchase price
of GBP24.9 million. A further estate has been acquired since the
period end for a purchase price of GBP4.8 million.
- In the six months to 30 September 2018, Stenprop's MLI portfolio
has seen 53 new lettings/lease renewals for an average term of
3.2 years at an average rent which is 15.2% above the passing rent
previously payable on those units.
- On 4 June 2018, Stenprop completed the sale of its joint venture
interest in Argyll Street in the West End of London. The sale
valued the property at the 31 March 2018 valuation of
GBP83.4 million and generated net proceeds of GBP22.8 million for
Stenprop.
- On 19 July 2018 Stenprop disposed of seven of its eight remaining
Swiss properties for a gross consideration of CHF103.65 million
compared with a valuation at 31 March 2018 of CHF103.23 million,
a gain of CHF420,000.
- On 10 September 2018, contracts were signed and notarised
for the sale of the Aldi retail portfolio. Aldi themselves acquired
all 14 properties for a purchase price of EUR35.8 million, a 9.0%
increase on the year end valuation of EUR32.8 million. Completion is
expected towards the end of December 2018.
Financial Highlights
- Declaration of an interim dividend on 21 November 2018 of
3.375 pence per share for the six months ended 30 September
2018 (2017: 4.0 pence), covered fully by property-related
earnings, in line with guidance and payable on 8 February 2019.
Subject to the receipt of regulatory approvals, a scrip alternative
will be offered, which the directors intend to match through the
buyback of shares.
- Diluted adjusted EPRA EPS* of 5.28 pence (2017: 4.87 pence) for
the period ended 30 September 2018. Diluted IFRS EPS was
4.63 pence (2017: 3.08 pence).
- Diluted EPRA net asset value per share of GBP1.42 as at
30 September 2018 (31 March 2018: GBP1.41). Diluted IFRS net asset
value per share was GBP1.37 per share (31 March 2018: GBP1.36).
Operating and financial review
Stenprop is pleased to report its consolidated interim financial
statements for the six months ended 30 September 2018.
Two-year transition plan update
Stenprop is progressing well with its transition to become a
focused UK MLI business. The plan required Stenprop to sell
approximately GBP470 million of existing non-MLI assets in the
period from 1 October 2017 to 31 March 2020 and to acquire at
least GBP220 million of MLI assets. The plan was also to use part of
the net sales proceeds to reduce overall leverage from levels of
55% to a targeted loan-to-value ratio of approximately 45% by
31 March 2019 and approximately 40% by 31 March 2020. Based
on achieving these targets, MLI would comprise approximately
65% of gross assets by the end of March 2020.
As at 30 September 2018, MLI assets comprised 27.0% of
Stenprop's total portfolio (up from 20.1% at 31 March 2018) and
overall loan to value was 47.3%.
During the six-month period under review, Stenprop acquired
six MLI estates in separate transactions for an aggregate
purchase price of GBP24.9 million. There are a number of portfolios
currently in the market for sale and, if we are successful in
acquiring at least one of these, we are confident that we
will exceed our target of GBP100 million of acquisitions for the
12 months ending 31 March 2019.
During the period, Stenprop sold non-MLI assets for a combined
sales price of GBP120.9 million, including seven of Stenprop's eight
Swiss properties and its share in a central London property in
Argyll Street. After repaying associated debt and selling costs,
and funding the acquisition of the six MLI properties mentioned
above, an amount of approximately GBP30 million remains to fund
MLI acquisitions currently being considered by Stenprop.
We remain confident that we are on track to achieve the milestones
required by the two-year transition plan as outlined above.
Financial Review
Earnings
The basic earnings attributable to ordinary shareholders for the
period ended 30 September 2018 were GBP13.2 million (2017:
GBP8.7 million). This equates to a diluted IFRS EPS of 4.63 pence
(2017: 3.08 pence).
Net rental income of GBP16.0 million (excluding Switzerland)
has remained broadly flat compared with the prior period,
showing an increase of 0.4%. The UK MLI component of net
rents contributed GBP5.1 million to the total at 30 September 2018,
more than double the amount of GBP2.3 million contributed by
this segment in the comparative period. At the same time the
UK non-MLI contribution has decreased by a similar amount
representing sales of property in pursuance of Stenprop's
transition into the MLI sector.
Net management fee income totalled GBP5.4 million for the period
(2017: GBP3.2 million) and related to fees earned by the Group
from management and administration services provided to
certain managed property syndicates and funds which had
historically been managed by the Group as an ancillary part of
its legacy business. Included in the total was a net performance
fee of GBP3.7 million and management fees of GBP0.3 million which
relate to a managed property in Germany. This asset was sold
during the period which resulted in the performance fee being
earned by Stenprop.
Operating expenses of GBP5.3 million (2017: GBP2.6 million) included
approximately GBP0.9 million of one-off costs associated with
REIT conversion and listing on the LSE and staff costs have
increased by approximately GBP0.8 million year on year following
the acquisition of the C2 Capital management platform in June
2017. There were no goodwill adjustments in the period to
30 September 2018.
In accordance with reporting standards widely adopted
across the real estate industry in Europe, the directors feel it
is appropriate and useful, in addition to providing the IFRS
disclosed earnings, to also disclose EPRA1 earnings. Adjusted
EPRA earnings attributable to shareholders were GBP15.1 million
(2017: GBP13.7 million), equating to a diluted adjusted EPRA EPS of
5.28 pence (2017: 4.87 pence) representing an 8.4% increase.
The diluted adjusted EPRA EPS attributable to the property
rental business amounts to 3.40 pence per share, with the
remaining amount of 1.88 pence per share being attributable
to the net management fee income (GBP5.4 million shown on the
condensed consolidated income statement, divided by the
average number of shares in the period as per note 5).
Stenprop has considered the adoption of further EPRA metrics,
and in line with best practice, believes it useful to disclose the
EPRA cost ratio (including direct vacancy costs). The EPRA
cost ratio includes all administrative and operating expenses
in the IFRS statements (including share of joint ventures).
Excluding the one-off costs associated with the listing and REIT
conversion, the EPRA cost ratio (including direct vacancy costs)
at 30 September 2018 was 31.9% (31 March 2018: 28.0%;
2017: 21.3%).
1. The European Public Real Estate Association ("EPRA") issued Best Practices
Policy Recommendations in November 2016, which provide guidelines for performance
measures relevant to real estate companies. Their recommended reporting standards
are widely applied across this market, aiming to bring consistency and transparency
to the sector. The EPRA earnings measure is intended to show the level of recurring
earnings from core operational activities with the purpose of highlighting the Group's
underlying operating results from its property rental business and an indication of
the extent to which current dividend payments are supported by earnings. The measure
excludes unrealised changes in the value of investment properties, gains or losses on
the disposal of properties and other items that do not provide an accurate picture
of the Group's underlying operational performance. The measure is considered to
accurately capture the long-term strategy of the Group, and is an indication of the
sustainability of dividend payments. See Note 5 for reconciliation to IFRS EPS.
Dividends
On 21 November 2018, the directors declared an interim
dividend of 3.375 pence per share (2017: 4.0 pence per share).
Subject to the receipt of regulatory approvals, the directors
intend to offer shareholders the option to receive all or part
of their dividend entitlement by way of a scrip issue of new
Stenprop ordinary shares or in cash. An announcement
containing details of the dividend, the timetable and the scrip
dividend terms is anticipated to be made on 20 December 2018.
It is expected that shares will commence trading ex-dividend on
16 January 2019 on the JSE and on 17 January 2019 on the LSE.
The record date for the dividend is expected to be 18 January
2019 and the dividend payment date 8 February 2019.
In respect of this dividend, given the Company's share price
which stands at a discount relative to net asset value, the
directors intend to match any scrip scheme take up through
the buyback of shares to mitigate the dilutive effect that would
otherwise occur from the issuance of new ordinary shares.
As one of the conditions of being a UK REIT, Stenprop must
distribute 90% of its aggregate UK property rental business
profits as calculated for tax purposes arising in the accounting
year by way of dividend within 12 months of the accounting
year end. There is no requirement to distribute non-UK property
rental business profits, profits from third party management
fees or capital gains. Notwithstanding this, Stenprop intends to
distribute at least 90% of its UK and non-UK property-related
EPRA earnings. Distribution of other non-property-related
earnings will be evaluated from time-to-time by the board
of directors ('the Board'). In considering the payment of this
dividend the Board has chosen to retain the earnings associated
with the non-recurring management fees earned in the period
which equated to 1.88 pence per share. Distribution of non-
property related earnings will continue to be evaluated from
time-to-time by the Board.
Net asset value
The IFRS basic and diluted net asset value per share at
30 September 2018 was GBP1.39 and GBP1.37 respectively (31 March
2018: GBP1.37 and GBP1.36 respectively).
With regard to the disclosure of EPRA earnings, the directors
feel that it is appropriate and useful, in addition to IFRS NAV, to
also disclose EPRA NAV2. The diluted EPRA NAV per share at
30 September 2018 was GBP1.42. This represents a 0.7% increase
on the diluted EPRA NAV per share of GBP1.41 at 31 March 2018.
Portfolio valuation
Including the Group's share of associates and joint ventures, its
investment properties were valued at GBP653.8 million at
30 September 2018 (31 March 2018: GBP733.6 million), of which
GBP129.0 million were classified as assets held for sale
(31 March 2018: GBP163.5 million). Assets held for sale consist
of the remaining Swiss property in Lugano, Euston House in
central London and the German Aldi portfolio that has been
contracted for sale. On a like for like basis, excluding the impact
of additions and disposals in the period, the valuation of the
portfolio since year end increased by 2.3%, of which 0.7%
resulted from currency movements. The German and Swiss
properties have been translated to GBP at exchange rates of
GBP1.00:EUR1.123 and GBP1.00:CHF1.276 respectively. This compares
with exchange rates of GBP1.00:EUR1.137 and GBP1.00:CHF1.337 at
31 March 2018.
Net initial
Market value Portfolio Annualised yield
Combined Portfolio 30 September by market gross rental (weighted Voids by
(including share of jointly 2018 value Properties Area income average) area
controlled entities) (GBP million) (%) (number) (sq m) (GBP million) (%) (%)
UK non multi-let Industrial 87.1 13.2 9 40,077 7.0 7.38 -
UK multi-let Industrial 176.6 27.0 36 244,870 12.4 6.40 7.1
Germany 226.0 34.6 9 72,599 10.6 3.98 7.8
Sub-total 489.7 74.8 54 357,546 30.0 5.46 6.5
Switzerland 17.4 2.7 1 5,974 1.2 6.22 -
UK non multi-let Industrial 80.5 12.3 1 10,099 4.2 3.89 -
Germany 31.1 4.8 14 18,843 1.9 5.47 -
Sub-total Assets Held for Sale 129.0 19.8 16 34,916 7.3 4.58 -
Total - wholly owned 618.7 94.6 70 392,462 37.3 5.28 5.9
Share of joint ventures 35.1 5.4 4 19,330 2.4 6.01 0.0
Total 653.8 100.0 74 411,792 39.7 5.31 5.6
2. The objective of the EPRA NAV measure is to highlight the fair value of
net assets on an ongoing, long-term basis. EPRA NAV is used as a reporting
measure to better reflect underlying net asset value attributable to shareholders.
Assets and liabilities that are not expected to crystallise in normal circumstances
such as the fair value of financial derivatives and deferred taxes on property
valuation surpluses are therefore excluded. The EPRA measure thus takes into
account the fair value of assets and liabilities as at the balance sheet date,
other than fair value adjustments to financial instruments, deferred tax and
goodwill. As the Group has adopted fair value accounting for investment property
per IAS40, adjustments to reflect the EPRA NAV include only those relating to the
revaluation of financial instruments and deferred tax. See Note 6
for reconciliation to IFRS NAV.
United Kingdom
The UK portfolio was independently valued at GBP344.2 million.
On a like for like basis, after excluding the acquisition of the six
MLI estates acquired in the six month period to 30 September
2018, the valuation of the UK portfolio increased by GBP5.1 million,
or 1.6%, over the valuation at 31 March 2018. The variance is
primarily due to a GBP3.9 million increase across the MLI portfolio
and a GBP1.0 million increase at Euston House. The valuation of the
Trafalgar Court property in Guernsey remained unchanged at
GBP59.9 million.
Germany
The German portfolio (excluding joint ventures) was valued at
EUR288.7 million. This represents a like for like increase of 3.3% on
the year-end valuation of EUR284.6 million. The increase of
EUR4.1 million was driven by a EUR2.2 million uplift at Stenprop's
Bleichenhof property in central Hamburg and
EUR2.1 million in relation to the Aldi portfolio which has been
included at the values contained within the notarised sale and
purchase agreements, less a provision for selling costs and tax.
All other properties in the German portfolio were independently
valued.
Switzerland
On 19 July 2018, Stenprop disposed of seven of its eight
remaining Swiss properties. The final property, known as
Lugano, was valued at CHF22.3 million at 30 September 2018.
The increase of 6.7% against the year end valuation of
CHF20.9 million reflects capital expenditure and the signing
of a new lease in September 2018. The property completed its
repositioning in October 2018.
Joint ventures
The Care Homes portfolio in Germany was independently
valued at EUR39.5 million, an increase of 0.5% on the 31 March
2018 valuation of EUR39.3 million.
Stenprop sold its 50% interest in 25 Argyll Street in London's
West End on 4 June 2018 by way of a share sale at a price
which valued the property at its 31 March 2018 valuation of
GBP83.4 million.
Debt
During the six-month period, the Swiss disposals resulted in
a reduction of associated debt of GBP43.4 million. Stenprop's
disposal of its interest in Argyll Street in London reduced debt
by a further GBP18.7 million. The net sales proceeds were used to
fund the six MLI acquisitions during the period at a total cost of
GBP26.5 million, with a remaining amount of approximately
GBP30 million held to fund MLI acquisitions currently being
considered by Stenprop.
During the transition phase, when existing assets are being
sold and the proceeds reinvested in MLI assets, depending on
the timing of such disposals and acquisitions, new acquisitions
may be funded by drawing down on a GBP50 million revolving
credit facility ('RCF') from Investec Bank Plc. It is intended that
drawdowns under the Investec RCF will be short term and will
be replaced as soon as possible from a combination of disposal
proceeds and longer-term debt finance at an average of 40% of
the purchase price.
The value of the property portfolio as at 30 September 2018,
including the Group's share of joint venture properties and
assets held for sale, was GBP653.8 million. Senior bank debt at the
same date was GBP309.4 million, resulting in an average loan-to-
value ratio of 47.3% (31 March 2018: 49.2%). The rolling credit
facility provided by Investec Bank Plc was undrawn as at
30 September 2018.
The weighted average debt maturity stood at 3.0 years at
30 September 2018 compared with 2.9 years at 31 March 2018.
The weighted average debt maturity of the combined MLI
portfolio stood at 3.8 years at 30 September 2018.
Excluding the Aldi portfolio, the sale of which was notarised on
10 September 2018, and the Swiss property at Lugano which
has been earmarked for sale, annual amortisation payments
are GBP3.3 million (31 March 2017: GBP1.2 million). GBP2.8 million of
this amount relates to the Trafalgar Court loan facility and will
cease once the additional funding of GBP6.1 million used in the
acquisition of the Industrial portfolio in June 2017 has been
repaid. The balance for this additional amount at
30 September 2018 was GBP3.3 million.
The all-in contracted weighted average cost of debt was 2.51%
at the period end, compared with 2.44% at 31 March 2018.
As previously mentioned, in view of its changed strategy, the
Group is targeting to reduce its level of total borrowings (at a
Group level) to approximately 45% of its gross asset value by 31
March 2019 and 40% by 31 March 2020, by utilising part of the
proceeds of disposals of its existing portfolio. Thereafter, the
directors will employ a level of borrowing that they consider to
be prudent for the asset class, taking into account prevailing
market conditions.
The Group mitigates interest rate risk through the use of
derivative instruments such as interest rate swaps or interest
rate caps in respect of at least 75% of its interest rate exposure.
The Group utilises derivative instruments solely for the purposes
of efficient portfolio management.
Net management fee income from assets
managed for third parties
With the focus of the business now on growing the MLI
portfolio, Stenprop has actively withdrawn from involvement
in its historic fund management arm. Significant performance
and exit fees were earned from the realisation of these third
party owned assets as a result of crystallised returns exceeding
performance hurdles. Due to these exits, the net management
fees earned in this period are exceptionally high and will not be
recurring. The six-month period to 30 September 2018 delivered
net management fee income of GBP5.4 million (2017: GBP3.2 million).
Future fee income is expected to decline to insignificant levels
as much of the third-party managed assets have now been sold.
The intention is to have ceased all fund management activity by
31 March 2020.
Foreign exchange
At 30 September 2018, approximately 40.1% of Stenprop's net
asset value and 40.4% of its net rental income are denominated
in Euros. Consequently the GBP:EUR exchange rate has a
material impact on reported GBP earnings and net asset values.
At the start of April 2018, the GBP:EUR rate was GBP1.00:EUR1.137
and the Euro strengthened over the six-month period by 1.3% to
GBP1.00:EUR1.123 as at 30 September 2018.
Stenprop matches the currency of borrowings to the underlying
asset. Where the timing and amount of a liability has been
determined, and where it will be met from the proceeds of a
sale which is also known in terms of timing and amount, the
currency risk is managed through hedging instruments.
Stenprop's diversification across the UK, Germany and
Switzerland (until the final Swiss property is sold) continues to
provide a natural spread of currencies and it remains our policy
not to hedge this natural spread, thereby maintaining a multi-
currency exposure.
Portfolio Summary
As at 30 September 2018, the Company's real estate portfolio,
including assets held for sale, comprised an interest in 38 non
MLI properties and 36 MLI estates with a combined valued
of GBP653.8 million3, with 52.5% in the United Kingdom, 44.8%
in Germany and 2.7% in Switzerland (by value). The portfolio
has a gross lettable area of approximately 411,792 3 sq m and
gross contracted annual rent of GBP39.7 million3. MLI accounts for
approximately 31% of rental income as at 30 September 2018
(2017: 17.6%) and this is expected to increase significantly over
time as Stenprop pursues further acquisitions in the MLI sector
and makes disposals from other asset classes. Offices account
for approximately 30% of rental income and retail accounts for
approximately 25%.
A table detailing the top five property investments in the
portfolio can be found below. These five investments account
for 79% of the total portfolio market value. The three largest
individual properties are Bleichenhof in Hamburg, Euston
House in London and Trafalgar Court in Guernsey, which total
GBP274.9 million and represent 41% of the total portfolio. The MLI
portfolio accounts for 27% of total portfolio asset value and the
Berlin retail centre portfolio (comprising three centrally located
daily needs centres) accounts for 10%.
Top five investments by value as at 30 September 2018
Annualised
Stenprop Gross Weighted
share of Proportion Rental Average
Market Ownership market of Stenprop Lettable (Stenprop unexpired
Value interest value Portfolio area share) lease term
Property (GBP million) % (GBP million) % Sector (m2) (GBP million) (years)
MLI portfolio, UK 176.6 100 176.6 27% MLI 244,870 12.4 4.1
Bleichenhof, Hamburg 134.5 94.9 127.6 20% Mixed use 19,527 4.8 4.5
Euston House, London* 80.5 100 80.5 12% Office 10,099 4.2 4.5
Berlin daily needs retail
centre portfolio, 67.1 100 67.1 10% Retail 35,346 3.8 8.9
Trafalgar Court, Guernsey 59.9 100 59.9 9% Office 10,564 4.3 8.6
Total 518.6 - 511.7 78% 320,406 29.5 5.5
* Asset Held for Sale.
3. Includes Stenprop's share of the properties held within joint venture investments.
MLI Portfolio update
As at 30 September 2018, Stenprop owned 36 MLI estates
comprising 2.6 million sq ft of MLI space, housing 489 tenants
and generating a rent of GBP12.4 million per annum.
MLI asset management
Over the period we have continued to see strong performance
from our MLI portfolio. During the six months to 30 September
2018, there were 53 new lettings and lease renewals across
the MLI portfolio, with an average increase in rents over the
previous passing rents for these units of 15.2%. The average
lease term granted was 3.2 years. An improvement in like-for-
like occupancy from 84.6% to 86.6% and the uplifts in rents
upon lease events has led to an overall like-for-like increase in
rental income across the portfolio of 2.2% over the period. We
continue to see good demand for MLI space from occupiers,
with a further 134,166 sq ft of space under offer as at
30 September 2018, reflecting an additional GBP762,183 of rent,
which would reduce our vacancy rate to approximately 6.3% if
completed. The September 2018 valuation of the MLI portfolio
resulted in a like-for-like increase of 2.6% over the period.
We continue to make progress with the development of
the Industrials operating platform. Our proptech and digital
marketing strategies are beginning to yield material efficiency
gains in leasing and management information, while the new
industrials.co.uk website which was launched in June 2018 saw
a 494% increase in traffic when compared to the old website.
We have also made tangible progress with more traditional
marketing techniques, with all vacant units now listed directly
on major portals and industrials.co.uk. We have also made
progress with the roll-out of our Smart Lease and serviced
industrial concepts.
Asset management highlights for the six months to
30 September 2018 included:
1. Leasing - A number of larger lettings were concluded
over the period, including a 10-year lease to Decrobond
Fabrications at Eurolink, Wakefield and a 5-year lease to
V Installations at Compass Industrial Park, Speke at 19%
and 17% uplifts to previous passing rents respectively. No
lettings were concluded over the period at rents below
ERVs, and to date we have seen little evidence of a slow
down due to Brexit.
2. Capital Expenditure - In addition to the refurbishment
project at Coningsby Park, Peterborough, and a number of
smaller projects, the most significant capital expenditure
over the period was the refurbishment of Unit 1, Anniesland
Business Park, Glasgow. This unit, which sits at the entrance
to the estate and was previously let to a local business, was
taken back and comprehensively refurbished before being
re-let to national trade operator, Toolstation, on a ten year
lease. The letting was 16% ahead of our estimated rental
value and reflected an increase on the previous passing
rent of 26%. It will enhance the trade counter profile of the
estate, facilitating further trade deals at premium rental
levels.
3. Industrials platform - June 2018 saw the launch of the new
Industrials website which is focused on marketing space to
new and existing tenants. In order to drive value from the
website a digital marketing strategy has been put in place
focusing on the key digital channels which will drive the most
value, search engine optimisation, Google search advertising
and remarketing. As a result of this strategy traffic has grown
significantly since the new website was launched with visits
up 494% (September 2018 versus June 2018). Furthermore,
we have now completed the roll-out of Industrials branding
across all internal and outsourced staff, including the launch
of an 0800 number on all marketing materials to handle all
enquiries centrally. This is part of our keen focus on delivering
superior customer service, which we believe will result
in enhanced customer satisfaction and increased tenant
renewals. Our serviced industrial concept has also gained
traction over the period, with a significant increase in the
number of Smart Leases being signed and the first additional
service products being prepared for market.
The Group continues to seek out appropriate additional
acquisition opportunities in the MLI space. As a result of the
long-established relationships and networks of the industrials.
co.uk team the Group acquired a further six estates for
GBP24.9 million over the six months to 30 September 2018 and is
under offer on a number of others.
MLI acquisitions
Stenprop continues to evaluate and find new MLI acquisitions
which meet its acquisition criteria and which are earnings
enhancing from the date of acquisition.
Stenprop completed the acquisition of a fully-let industrial
estate in Shrewsbury on 24 April 2018 for GBP2.9 million.
Greenwood Industrial Estate is located off Cartmel Drive in
the primary industrial area of Shrewsbury, three miles north of
the town centre. It comprises 30 units, totalling 44,611 sq ft of
industrial space.
The acquisition of a multi-let industrial estate in Kirkstall,
Leeds for GBP8.1 million completed on 1 June 2018. The estate
comprises 14 units totalling 111,081 sq ft of industrial space. Also
in June, Stenprop acquired Estuary Court, an industrial estate
in Newport, South Wales, for GBP3.1 million. Estuary Court is a
modern estate, located in the established industrial location of
Queensway Meadows. It comprises 20 units, totalling 34,980 sq
ft of industrial and trade counter space, and is fully let to
17 tenants.
In July 2018, Stenprop acquired two industrial estates in
Southampton and Preston in separate transactions for a total
of GBP7.45 million. In Southampton, Trinity Court at Brunel Road,
Totton, was acquired for GBP3.9 million. Trinity Court, which is
located within Calmore Industrial Estate, comprises 12 units,
totalling 36,790 sq ft. and is fully let. In Preston, Stenprop
acquired Carnfield Place at Walton Summit in an off-market
transaction for GBP3.55 million. Carnfield Place comprises eight
units, totalling 59,505 sq ft, and is fully let.
At the start of August 2018, Stenprop acquired the Lombard
Centre, an industrial estate in Aberdeen for GBP3.25 million.
The Lombard Centre is a modern estate, located next to
Aberdeen International Airport. It comprises ten units, totalling
32,622 sq ft of industrial space and is let to six tenants. There is
one vacant unit.
Post period end, on 5 October 2018, Stenprop completed the
acquisition of an industrial estate in Bridgwater, Somerset, for
GBP4.8 million. Dunball Industrial Estate is a modern estate, which
is strategically located just off junction 23 of the M5. Stenprop
has acquired four units, totalling 48,432 sq ft of industrial space.
Significantly, all the acquisitions were earnings accretive upon
acquisition, with strong underlying growth prospects due
to their locations in or around densely populated areas and
transport infrastructure. In addition, despite their high quality,
the aggregate purchase price across all assets acquired over
the period reflects a cost of GBP80 per sq ft, which remains at a
30% discount to the insurance reinstatement cost valuation of
the assets (before land) of GBP113 per sq ft. Given the inelastic
nature of supply in MLI in the UK, alongside the structural shift
in tenant demand, we believe that there remains significant
potential for rental growth in the sector.
The non-MLI portfolio update
The rest of our portfolio continues to perform steadily and is
largely fully let. We continue to asset manage the portfolio
with a view to maximising value for disposal as the rotation of
the portfolio into MLI progresses. The focus for the next year
is in disposing of the remaining retail properties in Grimsby,
Hemel Hempstead and Walsall, some of our other retail assets in
Germany and our remaining one property in Switzerland.
Disposals
On 19 July 2018, Stenprop announced the disposal of seven
of its eight remaining Swiss properties, being those located
at Altendorf, Arlesheim, Chiasso, Baar, Vevey, Montreux and
Sissach, for a gross sales consideration of CHF103.65 million. This
compared with the valuation of these properties at
31 March 2018 of CHF103.23 million, a gain of CHF420,000.
After debt repayment, taxes and transaction costs, the disposal
released proceeds of approximately CHF41 million. The remaining
property in Lugano has undergone substantial repositioning and
opened for trade in October 2018 after the completion of works.
The intention is to sell this property in 2019.
On 10 September 2018, contracts were signed and notarised for
the sale of the Aldi retail portfolio. Aldi themselves will acquire
all 14 properties for an aggregate price of EUR35.8 million, a 9.0%
increase on the year end valuation of EUR32.8 million. Completion
is expected before the end of December 2018.
Subsequent events
As detailed earlier in this report, on 5 October 2018, Stenprop
acquired an industrial estate in Bridgwater, Somerset, in an
off-market purchase from a private investor for GBP4.8 million.
The estate comprises four units, totalling 48,432 sq ft of
industrial space.
On 21 November 2018, the directors declared an interim
dividend of 3.375 pence per share (2017: 4.0 pence per share).
Subject to the receipt of regulatory approvals, the directors
intend to offer shareholders the option to receive all or part
of their dividend entitlement by way of a scrip issue of new
Stenprop ordinary shares or in cash. An announcement
containing details of the dividend, the timetable and the scrip
dividend terms is anticipated to be made on 20 December 2018.
It is expected that shares will commence trading ex-dividend on
16 January 2019 on the JSE and on 17 January 2019 on the LSE.
The record date for the dividend is expected to be 18 January
2019 and the dividend payment date 8 February 2019.
Prospects
In the period under review, Stenprop has delivered on its goal
to convert to UK REIT status and to list on the LSE. Its two-
year transition plan to become a focused UK MLI business is
progressing well, with targeted levels of acquisitions, sales and
leverage all considered achievable.
The impact on earnings and distributions during a period of
transition depends on several factors, including the timing
and commercial terms of acquisitions and disposals, and the
implementation of the deleveraging policy, with a key challenge
being the minimisation of cash surpluses to mitigate earnings
dilution. Ideally acquisitions should take place in advance of
disposals and be funded in the short term using the Investec
RCF; while this always remains the goal, market conditions are
not always conducive to achieving this.
In line with the guidance given in June 2018 at the time of the
release of the annual financial statements for the year ended
31 March 2018, an interim dividend of 3.375 pence per share was
declared on 21 November 2018, payable on 8 February 2019.
This compares with the property-related diluted adjusted EPRA
earnings per share of 3.40 pence for the period.
Assuming that current trading conditions continue to prevail,
and based on average exchange rates of EUR1.12:GBP1:00 and
CHF1.28:GBP1:00, Stenprop continues to target a final dividend of
3.375 pence in August 2019, giving a total dividend of
6.75 pence per share.
This general dividend forecast has been based on the Group's
dividend forecast and has not been reported on by the external
auditor. There can be no assurance that these targets will be
met or that the Company will make distributions in line with
these targets.
Given the nature of its business, Stenprop has adopted
distribution per share as its key performance measure, as this
is considered more relevant than earnings or headline earnings
per share.
Statement of Directors' responsibilities
Statement of principal risks and uncertainties
Stenprop is a listed property investment company with a diversified portfolio of commercial property currently located in the
United Kingdom, Germany and with one property in Switzerland. Its principal risks are therefore related to the commercial property
market in general and its investment properties. Other risks faced by the Group include strategy and performance, financial,
operational and regulatory risks.
The Audit and Risk Committee assists the Board with its responsibilities for managing risk. The principal risks currently facing
the business are described in more detail under the heading 'Risk Management' within the Company's Annual Report for the
year ended 31 March 2018. The Group's principal risks and uncertainties have not changed materially since the date of the Annual
Report.
Statement of going concern
The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. Therefore, they continue to adopt the going concern basis in preparing the financial statements.
Statement of Directors' responsibilities in respect of the interim report
The directors confirm that to the best of their knowledge:
i. the condensed set of consolidated financial statements has been prepared in accordance with IAS 34 'Interim Financial
Reporting';
ii. the condensed set of consolidated financial statements, which has been prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, or
the undertakings included in the consolidation as a whole as required by DTR 4.2.4R;
iii. the Operating and Financial Review together with the Statement of Principal Risks and Uncertainties above include a fair review
of the information required by the Disclosure Guidance and Transparency Rules ('DTR') 4.2.7R, being an indication of important
events that have occurred during the first six months of the financial year, a description of principal risks and uncertainties for
the remaining six months of the year, and their impact on the condensed set of consolidated financial statements; and
iv. the Operating and Financial Review together with the condensed set of consolidated financial statements include a fair review
of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial position or performance of the Company during that
period, and any changes in the related party transactions described in the last Annual Report that could do so.
The financial statements are published on the Company's website, www.stenprop.com. A list of the current directors of Stenprop
can be found on the Company's website. Legislation in Guernsey governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
Approved by the Board on 21 November 2018 and signed on its behalf:
Paul Arenson Patsy Watson
Chief Executive Officer Chief Financial Officer
Independent review report to Stenprop Limited
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report
for the six months ended 30 September 2018 which comprises the condensed consolidated statement of comprehensive income,
the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland)
2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial
Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state
to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority and the Listings Requirements of the Johannesburg Stock Exchange.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as issued by the
International Accounting Standards Board. The condensed set of financial statements included in this half-yearly financial report
has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as issued by the
International Accounting Standards Board.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for
use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in
the half-yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as issued by the International Accounting Standards Board and the Disclosure Guidance
and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
St Peter Port
Guernsey
21 November 2018
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2018
Reviewed Reviewed
30 September 30 September
2018 2017
Note GBP'000 GBP'000
Continuing operations
Net rental income 3 16,012 15,955
Revenue 21,092 20,438
Property expenses (5,080) (4,483)
Net management fee income 2 5,357 3,204
Management fee income 9,052 3,204
Adjustment to deferred consideration (3,695) -
Operating costs 4 (5,301) (2,628)
Net operating income 16,068 16,531
Fair value movement of investment properties 4,031 (293)
Income from associates 100 421
Income from joint ventures 960 1,829
Profit from operations 21,159 18,488
Net gain from fair value of derivative financial instruments 18 1,183
Interest receivable 164 170
Finance costs (3,870) (4,993)
Net foreign exchange loss (93) (417)
Gain on disposal of property - 336
Goodwill impairment - (3,500)
Profit for the period before taxation 17,378 11,267
Current tax (416) (799)
Deferred tax (2,124) (1,286)
Profit for the period from continuing operations 14,838 9,182
Discontinued operations
Loss for the period from discontinued operations 10 (1,541) (193)
Profit for the period 13,297 8,989
Profit attributable to:
Equity holders 13,209 8,652
Non-controlling interest derived from continuing operations 88 337
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation reserve 3,402 1,827
Total comprehensive profit for the period 16,699 10,816
Total comprehensive profit attributable to:
Equity holders 16,611 10,479
Non-controlling interest 88 337
Earnings per share
From continuing operations Pence Pence
IFRS EPS 5 5.22 3.16
Diluted IFRS EPS 5 5.17 3.14
From continuing and discontinued operations
IFRS EPS 5 4.68 3.09
Diluted IFRS EPS 5 4.63 3.08
Condensed consolidated statement of financial position
as at 30 September 2018
Reviewed Audited as at
30 September 31 March
2018 2018
Note GBP'000 GBP'000
ASSETS
Investment properties 8 489,679 535,509
Investment in associates 22 303
Investment in joint ventures 9 14,979 14,660
Other debtors 12 13,851 13,617
Deferred tax 218 -
Derivative financial instruments 684 712
Total non-current assets 519,433 564,801
Cash and cash equivalents 55,541 24,549
Trade and other receivables 12 5,903 8,208
Assets classified as held for sale 10 138,510 147,408
Total current assets 199,954 180,165
Total assets 719,387 744,966
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 318,603 315,551
Equity reserve (11,117) (8,453)
Retained earnings 59,875 57,947
Foreign currency translation reserve 25,688 22,286
Total equity attributable to equity shareholders 393,049 387,331
Non-controlling interest 2,991 2,939
Total equity 396,040 390,270
Non-current liabilities
Bank loans 11 239,409 256,697
Derivative financial instruments 313 699
Deferred tax 11,509 9,379
Total non-current liabilities 251,231 266,775
Current liabilities
Bank loans 11 2,800 2,800
Derivative financial instruments - -
Taxes payable 1,761 2,792
Accounts payable and accruals 12,298 14,622
Other loan and interest 1 -
Liabilities directly associated with assets classified as held for sale 10 55,256 67,707
Total current liabilities 72,116 87,921
Total liabilities 323,347 354,696
Total equity and liabilities 719,387 744,966
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2018
Share Foreign
capital currency Attributable Non-
and share Equity Retained translation to equity controlling Total
premium reserve earnings reserve shareholders interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2018 315,551 (8,453) 57,947 22,286 387,331 2,939 390,270
Issue of share capital 3,052 (65) - - 2,987 - 2,987
Credit to equity for equity-settled
share-based payments - 421 - - 421 - 421
Repurchase of own shares - (3,020) - - (3,020) - (3,020)
Profit for the period - - 13,209 - 13,209 52 13,261
Other comprehensive income for
the period - - - 3,402 3,402 - 3,402
Ordinary dividends - - (11,281) - (11,281) - (11,281)
Balance at 30 September 2018 318,603 (11,117) 59,875 25,688 393,049 2,991 396,040
Balance at 1 April 2017 310,141 (8,976) 40,945 22,440 364,550 2,051 366,601
Issue of share capital 5,410 (16) - - 5,394 - 5,394
Credit to equity for equity-settled
share-based payments - 1 - - 1 - 1
Profit for the period - - 8,652 - 8,652 308 8,960
Other comprehensive income for
the period - - - 1,827 1,827 - 1,827
Ordinary dividends - - (11,048) - (11,048) - (11,048)
Balance at 30 September 2017 315,551 (8,991) 38,549 24,267 369,376 2,359 371,735
Condensed consolidated statement of cash flows
for the six months ended 30 September 2018
Reviewed Reviewed
30 September 30 September
2018 2017
Note GBP'000 GBP'000
Operating activities
Profit from continuing operations 21,159 18,488
(Loss)/profit from discontinued operations (2,442) 419
18,717 18,907
Share of profit from associates (100) (421)
(Increase)/decrease in fair value of investment property (3,170) 2,216
Share of profit in joint ventures (960) (1,829)
Loss on disposal of subsidiaries 2,207 -
Exchange rate gains (92) (419)
Increase in trade and other receivables (1,361) (42)
Increase/(decrease) in trade and other payables 779 (2,358)
Interest paid (3,644) (3,914)
Interest received 576 538
Net tax paid (709) (419)
Net cash from operating activities 12,243 12,259
Contributed by: Continuing operations 14,524 10,695
Discontinued operations (2,281) 1,564
Investing activities
Dividends received from joint ventures 1,068 563
Purchase of investment property 8 (26,481) (57,858)
Capital expenditure 8 (5,091) (3,351)
Proceeds on disposal of assets held for sale - investment property 8 51,015 21,574
Acquisition of investment in subsidiary - (2)
Proceeds on disposal of assets held for sale - joint venture 22,726 -
Proceeds on disposal of investment in associate - 17,595
Disposal of subsidiary 13 9,875 -
Net cash disposed of in subsidiary (67) -
Net cash from/(used in) investing activities 53,045 (21,479)
Financing activities
New bank loans raised 11 10,211 6,107
New third party loans raised - 34,080
Dividends paid (8,294) (11,048)
Repayment of borrowings (29,205) (17,790)
Repurchase of shares (3,020) -
Financing fees paid (380) (904)
Net cash (used in)/from financing activities (30,688) 10,445
Net increase in cash and cash equivalents 34,600 1,225
Effect of foreign exchange rate changes 31 296
Cash and cash equivalents at beginning of the period 25,287 25,827
Cash and cash equivalents at end of the period 59,918 27,348
Contributed by: Continuing operations 55,541 26,063
Discontinued operations and assets held for sale 4,377 1,285
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
These reviewed condensed consolidated interim financial statements for the six months ended 30 September 2018 have been
prepared in accordance the International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards
Board ('IASB'), specifically IAS 34 'Interim Financial Reporting', the JSE Listings Requirements, the Disclosure and Transparency Rules
of the UK's FCA and applicable Guernsey law.
These financial statements have been prepared by, and are the responsibility of, the directors of Stenprop.
The accounting policies and methods of computation are consistent with those applied in the preparation of the annual financial
statements for the year ended 31 March 2018 which were audited and reported on by the Group's external auditor, except for the
new standards adopted during the period. The consolidated annual financial statements for the year ended 31 March 2018 are
available on the Company's website: www.stenprop.com.
The consolidated financial statements are presented in GBP (Pounds Sterling).
Going concern
At the date of signing these condensed consolidated financial statements, the Group has positive operating cash flow forecasts
and positive net assets. Management has reviewed the Group's cash flow forecasts for the 18 months to 31 March 2020 and, in
light of this review and the current financial position, they are satisfied that the Company and the Group have access to adequate
resources to meet the obligations and continue in operational existence for the foreseeable future, and specifically the 12 months
subsequent to the signing of these financial statements.
On 19 July 2018 Stenprop disposed of seven of its eight remaining Swiss properties. The remaining property at Lugano is classified
as held for sale. The bank loan in relation to this property has been refinanced on a short-term basis as a rolling credit facility to
reflect the intention to sell the asset in the short term. Should a decision be taken not to sell the property for any reason, or if the
sale process is delayed, the directors anticipate that, given the quality of the property, the low loan to value and the strong and
proven relationships with Swiss lenders, a refinancing could be secured on favourable terms if necessary.
The directors believe that it is therefore appropriate to prepare the accounts on a going concern basis.
Adoption of new and revised standards
In the current period, the following effective new and revised Standards and Interpretations have been adopted. Their adoption has
not had a material impact on the disclosures or the amounts reported in these interim financial statements.
- IAS 40 (amendments) Transfers of investment property (effective 1 January 2018)
- IFRS 2 (amendments) Classification and Measurement of Share-based Payment Transactions (effective
1 January 2018)
- IFRIC 22 Foreign Currency Transactions and Advance Consideration (effective 1 January 2018)
- IFRS 9 Financial instruments (effective 1 January 2018)
- IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
At the date of approval of these condensed consolidated financial statements, the Group has not applied the following revised
standard which has been issued but which is not yet effective:
- IFRS 16 Leases (effective 1 January 2019)
Impact assessment of adopting new accounting standards
IFRS 9: Financial instruments. This standard replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement
and outlines an impairment model which reflects expected credit losses. This differs from IAS 39 which only recognised those
credit losses which have been incurred. The new impairment model applies to the Group's financial assets including trade and other
receivables and cash and cash equivalents. It does not apply to financial liabilities as derivative financial instruments continue to
qualify for designation as at fair value through profit and loss under IFRS 9.
Where applicable the Group has applied a simplified approach to recognise expected credit losses for current assets. There has
been no material change in the classification and recognition of financial assets with no material quantitative impact due to the
recognition of an expected credit loss, with no corresponding reduction in financial assets.
IFRS 15: Revenue from Contracts with Customers. The standard combines a number of previous standards, setting out a five-
step model for the recognition of revenue as well as establishing principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of revenue. The standard applies to service charge income; car park
income; performance and management fee income.
Rental income arising from the leasing of property continues to be within the scope of IAS 17. Management has assessed that the
operating leases of the business are combined and have no separate performance obligations identifiable therein. In regard to
management and performance fees, fees earned are based on investments with infinite lives and are not subject to clawback on
a cumulative basis. For these reasons the changes introduced by IFRS 15 have resulted in no qualitative changes to the revenue
disclosure and have no quantitative impact on the consolidated financial statements of the Group.
Impact assessment of adopting new accounting standards
IFRS 16: Leases. The standard does not impact the Group's financial position as a lessor or the Group's rental income from its
investment properties. The standard requires lessees to recognise a right-of-use asset and related lease liability representing the
obligation to make lease payments. Management do not anticipate that the adoption of this standard will have a material impact
on the financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of condensed consolidated financial statements in accordance with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting
policies. Although the estimates are based on management's best knowledge of the amount, events or actions, actual results may
ultimately differ from those estimates.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that
have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
Critical Accounting Judgements and estimates
Significant estimates
Investment properties
The Group's investment properties are stated at estimated fair value, determined by directors, based on an independent external
appraisal. The valuation of the Group's property portfolio is inherently subjective due to a number of factors including the
individual nature of each property, its location and the expectation of future rentals. As a result, the valuations placed on the
property portfolio are subject to a degree of uncertainty and are made on the basis of assumptions that may not prove to be
accurate particularly in years of volatility or low transaction flow in the market. The estimated market value may differ from the
price at which the Group's assets could be sold at a particular time, since actual selling prices are negotiated between willing
buyers and sellers. As a result, if the assumptions prove to be false, actual results of operations and realisation of net assets could
differ from the estimates set forth in these financial statements, and the difference could be significant.
Deferred tax assets and liabilities
Tax liabilities are recognised when it is considered probable that there will be a future outflow of funds to a taxing authority. In
such cases, provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires
the application of judgement as to the ultimate outcome, which can change over time depending on facts and circumstances.
A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognised in
income in the period in which the change occurs. Deferred tax assets are recognised only to the extent it is considered probable
that those assets will be recoverable. This involves an assessment of when those assets are likely to reverse, and a judgement as to
whether or not there will be sufficient taxable profits available to offset the assets when they do reverse. This requires assumptions
regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change,
there can be an increase or decrease in the amounts recognised in respect of deferred tax assets as well as in the amounts
recognised in income in the period in which the change occurs.
Significant judgements
Assets held for sale
The directors have disclosed a number of properties which meet the criteria defined in IFRS 5: Assets held for sale and
discontinued operations. In the case of the one remaining Swiss property at Lugano, the directors consider the exceptions
permitted by IFRS 5:9 to apply in respect to the one-year requirement within which a sale should complete and Stenprop is
committed to the disposal of the asset in line with its strategy to exit the Swiss market. Accordingly, Stenprop has disclosed the
asset as held for sale. The fair value has been determined by the directors, based on an independent external appraisal.
2. Operating segments
The Group is focused on real estate investment in well-developed, large economies with established real estate markets. The
investment portfolio is primarily geographically diversified across Germany, the United Kingdom and Switzerland, with a further
sub-division within the UK between industrial and non-industrial. Each segment derives its revenue from the rental of investment
properties in the respective geographical regions.
Relevant financial information is set out below:
i) Information about reportable segments
Continuing Discontinued
operations operations
UK Non
Multi-let UK Multi-let
Germany Industrial Industrial Switzerland Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Reviewed for the period ended
30 September 2018
Net rental income 5,744 5,173 5,095 - 16,012
Fair value movement of investment
properties 1,923 1,180 928 - 4,031
Net gain/(loss) from fair value of financial
liabilities 15 47 (44) - 18
Income from associates 100 - - - 100
Income from joint ventures 715 231 - - 946
Interest receivable 163 1 - - 164
Finance costs (1,064) (1,488) (1,318) - (3,870)
Operating costs (311) (157) (258) - (726)
Net foreign exchange loss (26) - - - (26)
Loss for the period from discontinued
operations (see note 10) - - - (1,541) (1,541)
Taxation (2,431) (98) (147) - (2,676)
Total profit/(loss) per reportable
segment 4,828 4,889 4,256 (1,541) 12,432
Reviewed 30 September 2018
Investment properties 226,034 87,080 176,565 - 489,679
Investment in associates 22 - - - 22
Investment in joint ventures 14,939 - - - 14,939
Cash 11,122 3,646 19,090 - 33,858
Other 15,808 533 3,635 - 19,976
Assets classified as held for sale
(see note 10) 31,320 84,241 - 22,949 138,510
Total assets 299,245 175,500 199,290 22,949 696,984
Borrowings - bank loans 112,320 42,104 87,785 - 242,209
Other 13,614 2,361 7,590 - 23,565
Liabilities directly associated with assets
classified as held for sale (see note 10) 14,516 30,882 - 9,858 55,256
Total liabilities 140,450 75,347 95,375 9,858 321,030
Continuing Discontinued
operations operations
UK Non UK
Multi-let Multi-let
Germany Industrial Industrial Switzerland Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Reviewed for the period ended
30 September 2017
Net rental income 5,748 7,945 2,262 - 15,955
Fair value movement of investment
properties 7,464 (1,420) (6,337) - (293)
Net gain from fair value of financial
liabilities 175 867 141 - 1,183
Income from associates 421 - - - 421
Income from joint ventures 912 854 - - 1,766
Interest receivable 170 - - - 170
Finance costs (1,235) (3,042) (581) - (4,858)
Operating costs (286) (47) (97) - (430)
Net foreign exchange loss (30) (204) - - (234)
Other gains - 336 - - 336
Loss for the period from discontinued
operations (see note 10) - - - (193) (193)
Taxation (1,327) (245) (236) - (1,808)
Total profit/(loss) per reportable
segment 12,012 5,044 (4,848) (193) 12,015
Audited 31 March 2018
Investment properties 221,354 166,400 147,755 - 535,509
Investment in associates 303 - - - 303
Investment in joint venture 14,617 - - - 14,617
Cash 12,074 4,460 5,853 - 22,387
Other 15,091 1,724 2,331 - 19,146
Assets classified as held for sale
(see note 10) 28,987 23,546 - 94,875 147,408
Total assets 292,426 196,130 155,939 94,875 739,370
Borrowings - bank loans 110,889 70,800 77,808 - 259,497
Other 13,289 5,676 5,238 - 24,203
Liabilities directly associated with assets
classified as held for sale (see note 10) 14,063 - - 53,644 67,707
Total liabilities 138,241 76,476 83,046 53,644 351,407
ii) Reconciliation of reportable segment profit or loss
30 September 30 September
2018 2017
GBP'000 GBP'000
Rental income
Net rental income for reported segments 16,012 15,955
Profit or loss
Fair value movement of investment properties 4,031 (293)
Net gain from fair value of financial liabilities 18 1,183
Income from associates 100 421
Income from joint ventures 946 1,766
Interest receivable 164 170
Finance costs (3,870) (4,858)
Operating costs (726) (430)
Net foreign exchange loss (26) (234)
Other gains - 336
Loss for the period from discontinued operations (see note 10) (1,541) (193)
Taxation (2,676) (1,808)
Total profit per reportable segments 12,432 12,015
Other profit or loss - unallocated amounts
Net management fee income 5,357 3,204
Income from joint ventures 14 63
Finance costs - (135)
Tax, legal and professional fees (1,217) (41)
Audit fees (134) (116)
Administration fees (58) (119)
Non-executive directors' costs (94) (69)
Staff remuneration costs (2,205) (1,381)
Other operating costs (866) (472)
Net foreign exchange loss (68) (183)
Other losses - (3,500)
Taxation 136 (277)
Consolidated profit before taxation 13,297 8,989
Unallocated profit or loss amounts relate to management fee income and central costs incurred by the Group.
As part of the Group's acquisition of the Stenham property management business in 2014, it was agreed that certain performance
fees would result in additional variable consideration. This had the economic effect of reducing the performance fees retained by
the group. During the six month period to 30 September 2018 a gross performance fee of GBP7,390,000 (GBP3,695,000 net after the
consideration paid to Stenham Group Limited) was recognised in respect of the sale of the WestendGate property managed by the
Group and owned by a third party.
iii) Reconciliation of reportable segment financial position
30 September 31 March
2018 2018
GBP'000 GBP'000
ASSETS
Investment properties 489,679 535,509
Investment in associates 22 303
Investment in joint venture 14,939 14,617
Cash 33,858 22,387
Other 19,976 19,146
Assets classified as held for sale (see note 10) 138,510 147,408
Total assets per reportable segments 696,984 739,370
Other assets - unallocated amounts
Investment in joint ventures 40 43
Cash 21,683 2,162
Other 680 3,391
Total assets per consolidated statement of financial position 719,387 744,966
LIABILITIES
Borrowings - bank loans 242,209 259,497
Other 23,565 24,203
Liabilities directly associated with assets classified as held for sale (see note 10) 55,256 67,707
Total liabilities per reportable segments 321,030 351,407
Other liabilities - unallocated amounts
Other 2,317 3,289
Total liabilities per consolidated statement of financial position 323,347 354,696
3. Net rental Income
30 September 30 September
2018 2017
GBP'000 GBP'000
Rental income 18,404 19,692
Other income - tenant recharges 3,783 3,800
Other income 191 318
Discontinued Operations Adjustment (note 10) (1,286) (3,372)
Rental Income 21,092 20,438
Direct property costs (5,644) (5,338)
Discontinued Operations Adjustment (note 10) 564 855
Property expenses (5,080) (4,483)
Total net rental income 16,012 15,955
4. Operating costs
30 September 30 September
2018 2017
GBP'000 GBP'000
Tax, legal and professional fees 1,654 230
Audit fees 123 114
Interim review fees 30 30
Administration fees 194 231
Investment advisory fees 172 221
Non-executive directors costs 94 69
Staff remuneration costs 1,784 1,380
Share-based payments 421 1
Other operating costs 925 527
Discontinued Operations Adjustment (note 10) (96) (175)
5,301 2,628
The increase in Tax, legal and professional fees is driven by the costs associated with the London listing and conversion to REIT
status (GBP0.9 million).
Share-based payments of GBP421,000 (September 2017: GBP1,000) relates to the equity-settled incentive schemes operated by the
Group. As at 30 September 2018 the Group's equity reserve held GBP1,489,000 (March 2018: GBP1,133,000) in relation to the schemes
after the exercise of options at fair value of GBP65,000 (September 2017: GBP16,000) during the period.
5. Earnings per ordinary share
30 September 30 September
2018 2017
GBP'000 GBP'000
Reconciliation of profit for the period to adjusted EPRA1 earnings
Earnings per IFRS statement of comprehensive income attributable to shareholders 13,209 8,652
Adjustment to exclude loss from discontinued operations 1,541 193
Earnings per IFRS statement of comprehensive income from continuing operations
attributable to shareholders 14,750 8,845
Earnings per IFRS statement of comprehensive income attributable to shareholders 13,209 8,652
Adjustments to calculate EPRA earnings, exclude:
Changes in fair value of investment properties (3,170) 2,216
Changes in fair value of financial instruments (18) (1,183)
Deferred tax in respect of EPRA adjustments 624 1,462
Goodwill impairment - 3,500
Loss/(profit) on disposal of properties 1,163 (230)
Loss on disposal of subsidiaries 2,207 -
Adjustments above in respect of joint ventures and associates
Changes in fair value 41 (897)
Deferred tax in respect of EPRA adjustments 72 26
EPRA earnings attributable to shareholders 14,128 13,546
Further adjustments to arrive at adjusted EPRA earnings
Straight-line unwind of purchased swaps 40 144
Cost associated with group listing and REIT conversion 902 -
Adjusted EPRA earnings attributable to shareholders 15,070 13,690
Weighted average number of shares in issue (excluding treasury shares) 282,430,456 280,302,489
Share-based payment award 3,115,355 1,004,369
Diluted weighted average number of shares in issue 285,545,811 281,306,858
Earnings per share from continuing operations pence pence
IFRS EPS 5.22 3.16
Diluted IFRS EPS 5.17 3.14
Earnings per share pence pence
IFRS EPS 4.68 3.09
Diluted IFRS EPS 4.63 3.08
EPRA EPS 5.00 4.83
Diluted EPRA EPS 4.95 4.82
Adjusted EPRA EPS 5.34 4.88
Diluted adjusted EPRA EPS 5.28 4.87
As at 30 September 2018, the Company held 11,662,469 treasury shares (September 2017: 9,026,189 and March 2018: 9,026,189).
Straight-line unwind of purchased swaps
A further adjustment was made to the EPRA earnings attributable to shareholders relating to the straight line unwind of the
value as at 1 April 2014 of the swap contracts in the property companies acquired. When the property companies were acquired
by Stenprop with effect from 1 April 2014, it also acquired the bank loans and swap contracts which were in place within these
property companies. As a result, Stenprop took over loans with higher swap interest rates than would have been the case had new
loans and swaps been put in place at 1 April 2014. To compensate for this, the value of the swap break costs was calculated at
1 April 2014 and the purchase consideration for the property companies was reduced accordingly to reflect this liability.
Costs associated with Group Listing and REIT conversion
A further adjustment was made to the EPRA earnings attributable to shareholders relating to the costs associated with converting
to REIT status and the listing on the Special Funds Segment of the London Stock Exchange. Both costs are specific to non-
recurring activities and are not relevant to the underlying net income performance of the Group.
1. The European Public Real Estate Association (EPRA) issued Best Practices Policy Recommendations in November 2016, which provide guidelines
for performance measures relevant to real estate companies. Their recommended reporting standards are widely applied across this market,
aiming to bring consistency and transparency to the sector. The EPRA earnings measure is intended to show the level of recurring earnings from
core operational activities with the purpose of highlighting the Group's underlying operating results from its property rental business and an
indication of the extent to which current dividend payments are supported by earnings. The measure excludes unrealised changes in the value
of investment properties, gains or losses on the disposal of properties and other items that do not provide an accurate picture of the Group's
underlying operational performance. The measure is considered to accurately capture the long term strategy of the Group, and is an indication of the
sustainability of dividend payments.
Reconciliation of profit for the period to headline earnings
30 September 30 September
2018 2017
GBP'000 GBP'000
Earnings per IFRS statement of comprehensive income from continuing operations
attributable to shareholders 13,209 8,652
Adjustments to calculate headline earnings exclude:
Changes in fair value of investment properties (3,170) 2,216
Deferred tax in respect of headline earnings adjustments 624 1,436
Goodwill impairment - 3,500
Loss/(Profit) on disposal of properties 1,163 (230)
Costs associated with disposal of property company 2,207 -
Adjustments above in respect of joint ventures and associates
Changes in fair value of investment properties (107) (437)
Deferred tax 71 91
Headline earnings attributable to shareholders 13,997 15,228
Earnings per share pence pence
Headline EPS 4.96 5.43
Diluted headline EPS 4.90 5.41
6. Net asset value per ordinary share
30 September 31 March
2018 2018
GBP'000 GBP'000
Net assets attributable to equity shareholders 393,049 387,331
Adjustments to arrive at EPRA net asset value:
Derivative financial instruments (371) (13)
Deferred tax 11,074 13,276
Adjustments above in respect of non-controlling interests 1,429 1,641
EPRA net assets attributable to shareholders 405,181 402,235
Number of shares in issue (excluding treasury shares) 282,747,125 282,692,287
Share-based payment award 3,115,356 1,796,978
Diluted number of shares in issue 285,862,481 284,489,265
Net asset value per share (basic and diluted) GBP GBP
IFRS net asset value per share 1.39 1.37
Diluted IFRS net asset value per share 1.37 1.36
EPRA net asset value per share 1.43 1.42
Diluted EPRA net asset value per share 1.42 1.41
As at 30 September 2018, the Company held 11,662,469 treasury shares (March 2018: 9,026,189). Refer to note 7.
7. Share Capital
Authorised
1,000,000,000 ordinary shares with a par value of EUR0.000001258 each
30 September 31 March
2018 2018
Issued share capital (no. shares) (no. shares)
Opening balance 291,718,476 286,681,880
Issue of new shares 2,691,118 5,036,596
Closing number of shares issued 294,409,594 291,718,476
GBP'000 GBP'000
Authorised share capital
Share capital 1 1
Share premium 320,833 317,781
Less: Acquisition/transaction costs (2,231) (2,231)
Total share capital and share premium 318,603 315,551
There were no changes made to the number of authorised shares of the Company during the period under review. Stenprop
Limited has one class of share. All shares rank equally and are fully paid.
The Company has 294,409,594 (March 2018: 291,718,476) ordinary shares in issue at the balance sheet date. In the period to
30 September 2018, a total of 54,838 new ordinary shares were issued at an issue price of GBP1.16 per share in respect of the Deferred
Share Bonus Plan.
On 7 June 2018, the Company announced a final dividend of 4.0 pence per share in respect of the six months to 31 March 2018.
On 16 August 2018, the Company announced a take up of the scrip dividend representing 0.9% of the issued share capital and
2,636,280 shares were subsequently issued on 17 August 2018.
As at 30 September 2018, the Company held 11,662,469 treasury shares (March 2018: 9,026,189). In the period the shareholders
were offered the option to receive either a scrip dividend by way of an issue of new Stenprop shares, or a cash dividend. Given the
Company's share price, which is at a discount relative to NAV, the directors matched the scrip alternative through share purchases
to mitigate the dilutive effect that would otherwise have occurred through the issuance of new ordinary shares. During the period
19 July 2018 to 7 August 2018 the Company repurchased 2,636,280 shares at an average price of GBP1.146 per share.
8. Investment property
The consolidated fair value of the investment properties at 30 September 2018 was GBP618.7 million (31 March 2018: GBP535.5 million).
This includes an amount of GBP129.0 million (31 March 2018: GBP121.8 million) for properties which have been classified as assets held for
sale, including the remaining Swiss asset at Lugano, the German Aldi portfolio and Euston House in Central London. The carrying
amount of investment property is the fair value of the property as determined by registered independent appraisers having an
appropriate recognised professional qualification and recent experience in the location and category of the properties being valued
('valuers').
The fair value of each of the properties as at 30 September 2018 was assessed by the valuers in accordance with the Royal
Institution of Chartered Surveyors ('RICS') standards and IFRS 13. Valuers are qualified for purposes of providing valuations in
accordance with the 'Appraisal and Valuation Manual' published by RICS. Where a sale and purchase agreement has been signed as
at the Statement of Financial Position date, the fair value is taken as the sales price less expected associated disposal costs.
The valuations performed by the independent external valuers are reviewed internally by senior management. This includes
discussions of the assumptions used by the external valuers, as well as a review of the resulting valuations.
Discussions regarding the valuation process and results are held between senior management and the external valuers on a
bi-annual basis. The audit committee reviews the valuation results and, provided the committee is satisfied with the results,
recommends them to the board for approval.
The valuation techniques used are consistent with IFRS13 and use significant 'unobservable' inputs. Investment properties are all at
level 3 in the fair value hierarchy and valuations represent the highest and best use of the properties. There have been no changes
in valuation techniques since year end.
There are interrelationships between all these unobservable inputs as they are determined by market conditions. An increase in
more than one unobservable input would magnify the impact on the valuation. The impact on the valuation would be mitigated
by the interrelationship of two unobservable inputs moving in the opposite directions, e.g. an increase in rent may be offset by an
increase in yield, resulting in no net impact on the valuation. Expected vacancy rates may impact the yield with higher vacancy
rates resulting in higher yield. All revenue is derived from the underlying tenancies given on the investment properties.
With the exception of three recently acquired MLI properties, all investment properties are mortgaged, details of which can be
seen in note 11. As at the date of signing this report, there are no restrictions on the realisability of any of the underlying investment
properties, nor on the remittance of income and disposal proceeds.
The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2018 are detailed in the
table below:
Net initial
Market value Portfolio Annualised yield
Combined Portfolio 30 September by market gross rental (Weighted Voids by
(including share of jointly 2018 value Properties Area income average) area
controlled entities) (GBP million) (%) (number) (sq m) (GBP million) (%) (%)
UK non multi-let Industrial 87.1 13.2 9 40,077 7.0 7.38 -
UK multi-let Industrial 176.6 27.0 36 244,870 12.4 6.40 7.1
Germany 226.0 34.6 9 72,599 10.6 3.98 7.8
Sub-total 489.7 74.8 54 357,546 30.0 5.46 6.5
Switzerland 17.4 2.7 1 5,974 1.2 6.22 -
UK non multi-let Industrial 80.5 12.3 1 10,099 4.2 3.89 -
Germany 31.1 4.8 14 18,843 1.9 5.47 -
Sub-total Assets Held for Sale 129.0 19.8 16 34,916 7.3 4.58 -
Total - wholly owned 618.7 94.6 70 392,462 37.3 5.28 5.9
Share of joint ventures 35.1 5.4 4 19,330 2.4 6.01 0.0
Total 653.8 100.0 74 411,792 39.7 5.31 5.6
30 September 31 March
2018 2018
GBP'000 GBP'000
Opening balance 535,509 470,603
Properties acquired 26,481 149,831
Capitalised expenditure 5,091 5,549
Disposals through the sale of property (50,268) (34,946)
Disposals through the sale of subsidiary (see note 13) (29,919) (79,900)
Foreign exchange movement in foreign operations 6,873 (1,814)
Net fair value gain on investment property - continuing operations 4,031 20,223
Net fair value loss on investment property - discontinued operations (note 10) (861) (5,918)
Assets Held for Sale (7,258) 11,881
Closing balance 489,679 535,509
30 September 31 March
2018 2018
GBP'000 GBP'000
Acquisitions UK
Stenprop Industrials 1 2 Limited 25 properties - 127,000
Stenprop Industrials 3 Limited 4 properties - 16,715
Stenprop Industrials 4 Limited 6 properties 26,481 -
Stenprop Industrials 4 Limited 1 property - 6,116
Total 26,481 149,831
Disposals
Germany
Stenprop Hermann Limited (Burger King) - (2,931)
Swiss
Bruce Properties Sarl (Chiasso) (6,825) -
Algy Properties Sarl (Sissach) (2,993) -
Kantone Holdings Limited (Vevey) (4,623) -
Kantone Holdings Limited (Baar) (16,010) -
Kantone Holdings Limited (Montreux) (19,817) -
Kantone Holdings Limited (Granges-Paccot) - (15,414)
David Properties Sarl (Cham) - (10,711)
UK
GGP1 Limited (Uxbridge) - (3,000)
GGP1 Limited (Worthing) - (2,890)
Disposals through the sale of property (50,268) (34,946)
Swiss
Polo Property GmbH (Altendorf) (20,219) -
Polo Property GmbH (Arlesheim) (9,700) -
UK
Normanton Properties Limited (Pilgrim St) - (79,900)
Disposals through the sale of subsidiary (note 13) (29,919) (79,900)
Total (80,187) (114,846)
Gain on disposal of property (discontinued operations only)
Foreign
Sales Disposal Net Sales Carrying exchange Gain/(loss)
proceeds costs proceeds value movement on disposal
30 September 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Discontinued Operations
Chiasso, Switzerland 7,366 (126) 7,240 (6,825) (2) 413
Sissach, Switzerland 3,487 (128) 3,359 (2,993) (2) 364
Vevey, Switzerland 4,623 (219) 4,404 (4,623) 1 (218)
Baar, Switzerland 17,788 (147) 17,641 (16,010) (8) 1,623
Montreux, Switzerland 19,198 (824) 18,374 (19,817) 8 (1,435)
52,462 (1,444) 51,018 (50,268) (3) 747
Foreign
Sales Disposal Net Sales Carrying exchange Gain/(loss)
proceeds costs proceeds value movement on disposal
31 March 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Continuing Operations
Dolphin Bridge House, Uxbridge, UK 3,400 (64) 3,336 (3,000) - 336
Wicker House & Studios, Worthing, UK 3,650 (50) 3,600 (2,890) - 710
7,050 (114) 6,936 (5,890) - 1,046
Discontinued Operations
Granges-Paccot, Switzerland 15,953 (581) 15,372 (15,414) (3) (45)
Cham, Switzerland 10,783 (167) 10,616 (10,711) (1) (96)
Burger King, Hermann, Germany 2,931 - 2,931 (2,931) - -
29,667 (748) 28,919 (29,056) (4) (141)
9. Investment in joint ventures
Details of the Group's joint ventures at the end of the reporting period are as follows:
Place of Principal % equity owned by
Name incorporation activity subsidiary
Luxembourg
Elysion S.A. Luxembourg Holding company 50.00
Elysion Braunschweig Sarl Luxembourg Property company 50.00
Elysion Dessau Sarl Luxembourg Property company 50.00
Elysion Kappeln Sarl Luxembourg Property company 50.00
Elysion Winzlar Sarl Luxembourg Property company 50.00
Guernsey
Stenpark Management Limited Guernsey Management company 50.00
Republic of Ireland
Ardale Industrials Limited Republic of Ireland Management company 50.00
On 4 June 2018, Stenprop completed the sale of its joint venture interest in Argyll Street in the West End of London by way of sale
of shares.
Summarised consolidated financial information in respect of the Group's joint ventures is set out below. Where applicable, these
represent the consolidated results of the respective holding companies.
Stenpark Stenprop Ardale
Elysion Management Argyll Industrials
S.A. Limited Limited Limited TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2018
Investment property 35,429 - - - 35,429
Current assets 438 67 - 21 526
Assets 35,867 67 - 21 35,955
Bank loans (19,402) - - - (19,402)
Intergroup shareholder loan (13,731) - - - (13,731)
Deferred tax (1,183) - - - (1,183)
Financial liability (246) - - - (246)
Current liabilities (97) (8) - (1) (106)
Liabilities (34,659) (8) - (1) (34,668)
Net assets of joint ventures 1,208 59 - 20 1,287
Net assets of joint ventures excluding shareholder loans 14,939 59 - 20 14,998
Group share of joint ventures' net assets 14,939 30 - 10 14,979
Revenue 1,228 - 876 - 2,104
Interest payable (889) - (199) - (1,088)
Tax expense (96) - - - (96)
Profit/(loss) from continuing operations and total
comprehensive income/(loss) excluding interest due to
the Group 715 (10) 462 38 1,205
Share of joint ventures' profit/(loss) due to the Group 715 (5) 231 19 960
31 March 2018
Investment property 34,878 - 83,400 - 118,278
Current assets 607 151 5,751 18 6,527
Assets 35,485 151 89,151 18 124,805
Bank loans (19,454) - (37,373) - (56,827)
Shareholder loan (13,463) - - - (13,463)
Deferred tax (1,104) - - - (1,104)
Financial liability (137) - (453) - (590)
Current liabilities (172) (82) (4,235) (1) (4,490)
Liabilities (34,330) (82) (42,061) (1) (76,474)
Net assets of joint ventures 1,155 69 47,090 17 48,331
Net assets of joint ventures excluding shareholder loans 14,618 69 47,090 17 61,794
Group share of net assets 14,618 34 23,545 8 38,205
Net assets directly associated with assets classified as
held for sale adjustment (see note 10) - - (23,545) - (23,545)
Group share of joint ventures' net assets 14,618 34 - 8 14,660
Revenue 2,450 381 4,794 35 7,660
Interest payable (1,795) - (1,115) - (2,910)
Tax expense (713) - - - (713)
Profit from continuing operations and total
comprehensive income excluding interest due to the
Group 4,678 101 5,760 30 10,569
Share of joint ventures' profit due to the Group 4,678 51 2,880 15 7,624
Elysion S.A
Stenprop owns 100% of the shares and shareholder loans in Bernina Property Holdings Limited ('Bernina'). Bernina in turn owns
50% of the issued share capital and 100% of the shareholder loans of Elysion S.A., a company incorporated in Luxembourg which
is the beneficial owner of the Care Home portfolio. The remaining 50% of Elysion S.A. is owned by a joint venture partner which
manages the portfolio.
The acquired shareholder loans have attracted a 10% compounded interest rate since inception in 2007. The outstanding
shareholder loan, which is wholly owned by Stenprop, has been valued at the recoverable balance which is deemed equal to the net
assets of the joint venture excluding the shareholder loan.
Stenpark Stenprop Ardale
Elysion Management Argyll Industrials
S.A. Limited Limited Limited TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2018
Opening balance 14,618 34 - 8 14,660
Share of joint venture profit 715 (5) 231 19 960
Distribution received from joint venture (575) - - (17) (592)
Foreign exchange movement in foreign operations 181 1 - - 182
Disposal of joint venture - - (231) - (231)
Closing balance 14,939 30 - 10 14,979
31 March 2018
Opening balance 10,283 37 21,115 - 31,435
Share in associates acquired during the period - - - (1) (1)
Share of joint venture profit 4,678 51 2,880 15 7,624
Distribution received from joint venture (613) (54) (450) (6) (1,123)
Foreign exchange movement in foreign operations 270 - - - 270
Transfer to Assets Held for Sale and Discontinued
Operations (note 10) - - (23,545) - (23,545)
Closing balance 14,618 34 - 8 14,660
10. Assets held for sale and discontinued operations
Management consider 16 properties (the properties known as Lugano in the Swiss portfolio, the Aldi portfolio and Euston House,
London) to meet the conditions relating to assets held for sale, as per IFRS 5: Non-current Assets Held for Sale. The properties are
expected to be disposed of during the next 12 months. The sale of Lugano, which is valued at September 2018 at CHF22.25 million
(GBP17.4 million) may not complete within 12 months. However, Stenprop is committed to the disposal of the asset in line with its
strategy to exit the Swiss market. Accordingly, Stenprop has disclosed the asset as held for sale. The fair values of all assets held for
sale have been determined by an external valuer, Jones Lang LaSalle. Where a sale and purchase agreement has been signed as at
the Statement of Financial Position date, the fair value is taken as the sales price less expected associated disposal costs.
The fair value of these properties, and their comparatives are shown in the table below:
30 September 31 March
2018 2018
GBP'000 GBP'000
Investment properties 129,021 121,764
Investment in joint ventures - 23,545
Cash and cash equivalents 4,377 738
Trade and other receivables 5,112 1,361
Total assets classified as held for sale 138,510 147,408
Bank loans 46,729 62,225
Derivative financial instruments 311 14
Deferred tax 1,166 3,897
Accounts payable and accruals 7,050 1,571
Liabilities directly associated with assets classified as held for sale 55,256 67,707
In the six months to 30 September 2018, the results of the eight properties (the entire Swiss portfolio) have been recognised as
discontinued operations in accordance with IFRS 5.32. Seven of these properties had been sold at the reporting date.
The results of the discontinued operations were as follows:
30 September 30 September
2018 2017
GBP'000 GBP'000
Net rental income 722 2,517
Rental income 1,286 3,372
Property expenses (564) (855)
Operating costs (96) (175)
Net operating income 626 2,342
Fair value movement of investment properties (861) (1,923)
Loss on disposal of subsidiaries (2,207) -
(Loss)/profit from operations (2,442) 419
Profit/(loss) on disposal of property 747 (106)
Net finance costs (222) (361)
Net foreign exchange losses - (2)
Loss for the period before taxation (1,917) (50)
Current tax (1,742) (499)
Deferred tax 2,118 356
Loss for the period from discontinued operations (1,541) (193)
Current year disposals
On 19 July 2018, the Group disposed of seven properties in Switzerland, two of which were disposed of as subsidiaries and are
further discussed in note 13, with the remaining five disposed of as assets. Of the five assets sold, three were located in Baar, Vevey
and Montreux and were owned by Kantone Holdings Limited whilst Chiasso and Sissach were owned by Bruce Properties Sarl and
Clint Properties Sarl respectively:
- Baar was sold for CHF22.7 million (CHF22.5 million after disposal costs) generating a profit of CHF2.1 million against the year
end fair value of CHF20.4 million.
- Vevey was sold for CHF5.9 million (CHF 5.6 million after disposal costs) resulting in a loss of CHF0.3 million against the year
end fair value and reflecting only the sales costs.
- Montreux was sold for CHF24.5million (CHF23.5 million after disposal costs). At disposal, there was a loss of CHF1.8 million as
the property was held at a fair value of CHF25.3 million.
- Chiasso was sold for CHF9.4 million (CHF9.2 million after disposal costs). At disposal, there was a profit of CHF0.5 million as the
property was held at a fair value of CHF8.7 million.
- Sissach was sold for CHF4.5 million (CHF4.3 million after disposal costs). At disposal, there was a profit of CHF0.5 million as the
property was held at a fair value of CHF3.8 million.
As part of the agreements entered into for the sale of the seven Swiss properties, all of which were sold to the same buyer,
Stenprop provided a guarantee for obligations and liabilities of each of the selling entities. The maximum amount of the guarantee
is CHF6.0 million, which lasts until all obligations under the sale agreements have been fulfilled, with a backstop date of 31 July
2028. As at the date of signing these accounts, there had not been any claim under the guarantee.
Prior year disposals
On 1 July 2017, the Group disposed of the Kantone Holdings Limited properties known as Grange Paccot 1 and Grange Paccot 2,
Switzerland, for CHF20 million (equating to CHF19.9 million after disposal costs). At disposal, there was a loss of CHF0.1 million to
the Group equating to the disposal costs, as the property was already held at a fair value equivalent to the sale price. On
30 October 2017, the Group disposed of the property known as Cham which was the sole property owned by David Properties
S.a.r.l for CHF14.2million (equating to CHF14.1 million after disposal costs). At disposal, there was a loss of CHF0.1 million to the
Group equating to the disposal costs, as the property was already held at a fair value equivalent to the sale price.
11. Borrowings
30 September 31 March
2018 2018
GBP'000 GBP'000
Opening balance 259,497 229,051
Loan repayments (44,257) (60,808)
New loans 10,211 89,703
Amortisation of loans (2,147) (5,751)
Capitalised borrowing costs (260) (505)
Amortisation of transaction fees 189 401
Foreign exchange movement in foreign operations 3,480 (1,152)
Adjustment for liabilities directly associated with assets classified as held for sale adjustment
(see note 10) 15,496 8,558
Total borrowings 242,209 259,497
Amount due for settlement within 12 months 49,529 65,025
Amount due for settlement between one to three years 56,864 76,258
Amount due for settlement between three to five years 182,545 180,439
Liabilities directly associated with assets classified as held for sale adjustment (see note 10) (46,729) (62,225)
242,209 259,497
Non-current liabilities
Bank loans 239,409 256,697
Total non-current loans and borrowings 239,409 256,697
The maturity of non-current borrowings is as follows:
Amount due for settlement between one to three years 56,864 76,258
Amount due for settlement between three to five years 182,545 180,439
239,409 256,697
Current liabilities
Bank loans 49,529 65,025
Liabilities directly associated with assets classified as held for sale adjustment (see note 10) (46,729) (62,225)
Total current loans and borrowings 2,800 2,800
Total loans and borrowings 242,209 259,497
The facilities are secured by legal charges over the properties to which they correspond.
There is no cross-collaterisation of the facilities. The terms and conditions of outstanding loans are as follows:
Nominal value Carrying value*
30 30
Loan September 31 March September 31 March
interest Maturity 2018 2018 2018 2018
Entity Note Amortising rate Currency date GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom
Laxton Properties
Limited No LIBOR 1.4% GBP 08/05/2020 27,540 27,540 27,440 27,410
Davemount
Properties Limited No LIBOR 2.25% GBP 26/05/2021 4,000 4,000 3,979 3,975
LPE Limited Yes LIBOR 2.5% GBP 31/03/2020 33,308 34,708 33,014 34,317
GGP1 Limited No LIBOR 2.25% GBP 26/05/2021 5,175 5,175 5,111 5,099
Industrials UK LP No LIBOR 2.25% GBP 02/06/2022 77,984 77,984 77,739 77,808
Stenprop Industrials
4 Limited No LIBOR 2.25% GBP 01/06/2023 10,211 - 10,046 -
Switzerland
Algy Properties
S.a.r.l. 1 Yes LIBOR 2.47% CHF 31/03/2019 - 2,310 - 2,310
Bruce Properties
S.a.r.l. 1 No LIBOR 1.35% CHF 29/03/2019 - 3,557 - 3,557
Kantone Holdings 3 month
Limited 1 Yes LIBOR 1.15% CHF rolling facility 6,269 26,296 6,269 26,296
3 month
Polo Property GmbH 1 Yes LIBOR 1.15% CHF rolling facility - 17,019 - 17,020
Germany
Century BV Yes Euribor 1.55% EUR 31/12/2022 7,382 7,290 7,305 7,205
Century 2 BV Yes Euribor 1.55% EUR 31/12/2022 3,839 3,791 3,795 3,742
Stenham Beryl
Limited Yes Euribor 1.85% EUR 30/04/2020 4,557 4,565 4,557 4,565
Stenham Crystal
Limited Yes Euribor 1.85% EUR 30/04/2020 3,806 3,812 3,806 3,812
Stenham Jasper
Limited Yes Euribor 1.85% EUR 30/04/2020 4,657 4,665 4,657 4,665
Isabel Properties BV No Euribor 2.32% EUR 30/12/2021 8,015 7,915 8,015 7,915
Bleichenhof GmbH &
Co. KG No Fixed 1.58% EUR 28/02/2022 75,645 74,694 75,645 74,694
Stenprop Hermann
Ltd No Euribor 1.13% EUR 30/06/2020 8,398 8,293 8,386 8,274
Stenprop Victoria
Ltd No Euribor 1.28% EUR 31/08/2020 9,174 9,058 9,174 9,058
289,960 322,672 288,938 321,722
* The difference between the nominal and the carrying value represents unamortised facility costs.
1. All of the Swiss properties owned by the Group, with the exception of Lugano, were sold in July 2018. At this time all outstanding loans in respect
of the whole of the Swiss portfolio were repaid. In August 2018 the sole remaining property, Lugano, was refinanced for CHF8 million on a three
month rolling credit facility at a margin of LIBOR 1.15%.
12. Trade and other receivables
30 September 31 March
2018 2018
GBP'000 GBP'000
Non-current receivables
Other debtors 13,931 13,617
Transfer to assets held for sale (see note 10) (80) -
13,851 13,617
Non-current other debtors includes GBP12.8 million (March 2018: GBP12.5 million) of loans advanced under the Share Purchase Plan
and GBP1.1 million (March 2018: GBP1.1 million) advanced on 30 March 2017 to purchase one million Stenprop shares in the market by
Ferryman Capital Partners Limited, a company in which Warren Lawlor, a non-executive director, has a one-third beneficial interest.
Part of the loans are denominated in EUR are therefore subject to foreign exchange movements.
30 September 31 March
2018 2018
GBP'000 GBP'000
Current receivables
Accounts receivable* 5,510 7,089
Other debtors 4,663 1,755
Prepayments 762 725
Transfer to assets held for sale (see note 10) (5,032) (1,361)
5,903 8,208
* Included in this balance are provisions for doubtful debts of GBP418,081 (March 2018: GBP260,918).
13.Disposal of subsidiaries
On 17 July 2018, the Group disposed of its 100% shareholding in Polo Property GmbH for a consideration of CHF12,663,799. Polo
Property GmbH owned the properties known as Altendorf and Arlesheim in Switzerland. The impact of the disposal on the Group is
shown below:
30 September
2018
GBP'000
Carrying value of net assets at disposal date
Investment property 29,919
Trade and other receivables 25
Cash and cash equivalents 67
Borrowings (17,212)
Trade and other payables (1,336)
Net assets disposed of 11,463
Cash consideration 9,875
Selling costs (389)
Net disposal proceeds 9,486
Foreign exchange movement in foreign operations (230)
Loss on disposal of subsidiaries (2,207)
Prior year disposals
On 11 January 2018, the Group disposed of its 100% shareholding in Normanton Properties Limited for a consideration of
GBP42,607,525. Normanton Properties Limited owned the property known as Pilgrim Street in London. The impact of the disposal on
the Group is shown below:
31 March
2018
GBP'000
Carrying value of net assets at disposal date
Investment property 79,900
Trade and other receivables 205
Cash and cash equivalents 1,831
Borrowings (37,608)
Trade and other payables (1,694)
Net assets disposed of 42,634
Cash consideration 42,608
Loss on disposal of subsidiaries (26)
14. Financial Risk Management
Fair value measurements
The fair value measurement for the Group's financial assets and financial liabilities are categorised into different levels in the fair
value hierarchy. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the
measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices). The fair value of the Group's secured loan facilities and derivative financial
instruments are included in Level 2.
Level 3: unobservable inputs for the asset or liability. The fair value of the Group's investment properties is included in Level 3.
Valuations represent the highest and best use of the properties.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the
transfer has occurred. There were no transfers between levels for the period ended 30 September 2018.
The fair value of all other financial assets and liabilities is not materially different from their carrying value in the financial statements.
The Group's financial risk management objectives and policies are consistent with those disclosed in the audited consolidated
financial statements for the year ended 31 March 2018.
15. Related party transactions
Parties are considered related if one party has control, joint control or significant influence over the other party in making financial
and operating decisions. Transactions with related parties are made on terms equivalent to those that prevail in an arm's length
transaction.
There have been no material changes in the related party transactions described in the Annual Report and Accounts for the year
ended 31 March 2018.
16. Events after the reporting period
On 5 October 2018, Stenprop acquired an industrial estate in Bridgwater, Somerset, in an off-market deal from a private investor for
GBP4.8 million. Dunball Industrial Estate is a modern estate, which is strategically located just off junction 23 of the M5. Stenprop has
acquired four units, totalling 48,432 sq ft of industrial space.
On 21 November 2018, the directors declared an interim dividend of 3.375 pence per share (2017: 4.0 pence per share). Subject
to the receipt of regulatory approvals, the directors intend to offer shareholders the option to receive all or part of their dividend
entitlement by way of a scrip issue of new Stenprop ordinary shares or in cash. An announcement containing details of the
dividend, the timetable and the scrip dividend terms is anticipated to be made on 20 December 2018. It is expected that shares will
commence trading ex-dividend on 16 January 2019 on the JSE and on 17 January 2019 on the LSE. The record date for the dividend
is expected to be 18 January 2019 and the dividend payment date 8 February 2019.
Corporate information
STENPROP LIMITED SA transfer secretaries Broker and financial adviser
(Registered in Guernsey) Computershare Investor Services Numis Securities Limited
(Registration number 64865) Proprietary Limited The London Stock Exchange
LSE share code: STP (Registration number Building
JSE share code: STP 2004/003647/07) 10 Paternester Square
ISIN: GG00BFWMR296 Rosebank Towers, 15 Biermann London, EC4M 7LT
Avenue,
Registered office of the Company Rosebank, Johannesburg, 2196, Guernsey registrars
Stenprop Limited South Africa Computershare Investor Services
(Registration number 64845) (Guernsey) Limited
Kingsway House Correspondence address 1st Floor, Tudor House
Havilland Street PO Box 61051 Le Bordage
St Peter Port Marshalltown, 2107 St Peter Port
GY1 2QE South Africa Guernsey
Guernsey GY1 1DB
Legal advisors
Postal address of the Company Bryan Cave Leighton Paisner LLP Correspondence address
180 Great Portland Street Adelaide House 2nd Floor, Queensway House
London, W1W 5QZ London Bridge Hilgrove Street
United Kingdom London, EC4R 9HA St. Helier
United Kingdom Jersey
Company secretary JE1 1ES
Sarah Bellichi South African corporate advisor Channel Islands
Java Capital Proprietary Limited
JSE sponsor (Registration number Auditor
Java Capital Trustees and Sponsors 2012/089864/07) Deloitte LLP
Proprietary Limited 6A Sandown Valley Crescent Regency Court
(Registration number Sandown Glategny Esplanade
2006/005780/07) Sandton, 2196 St Peter Port
6A Sandown Valley Crescent South Africa GY1 3HW
Sandown (PO Box 522606, Saxonwold, 2132) Guernsey
Sandton, 2196 Channel Islands
South Africa
(PO Box 522606, Saxonwold, 2132)
www.stenprop.com
Released on 22 November 2018
Date: 22/11/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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